What happens when Dow Jones Industrial Average components have dividend yields on the common stocks that are above the yield of the 10-year Treasury Note or even the 30-Year Treasury Long Bond? In the past, dividend and income buyers surfaced along with value investors who try to look far out beyond the current investment climate. So far this summer that is not the case, as the DJIA has not been immune from market selling and as equity investors are becoming harder and harder to find during the dog days of summer.
After taking a look at today’s huge yield drop again in the 10-year Treasury notes (at 2.52%) and the 30-Year Treasury Bond (at 3.55%), the amount of stocks out of the 30 DJIA components with higher yields than the 10-Year Treasury alone are 12 of 30. If you add in the 8 of the 30 DJIA components that have higher dividend yields than the 30-Year Treasury Bond yield, you have 20 of the 30 components yielding more than the 10-Year. Our average yield may differ slightly due to rounding to the closest one-tenth of a percentage point, but it seems that average DJIA component yield sits at 2.86% today.
30YR T-BOND 3.54% to 3.56%
AT&T Inc. (NYSE: T) $26.82 (52-Week: $23.78-28.73) 6.30% yield.
Will Google, Skype, Vonage, and VocalTec drive away more land-line users?
Chevron Corporation (NYSE: CVX) $73.61 (52-Week: $66.83-83.41) 3.90% yield.
E.I. du Pont de Nemours (NYSE: DD) $39.64 (52-Week: $30.06-42.66) 4.10% yield.
Johnson & Johnson (NYSE: JNJ) $57.89 (52-Week: $56.86-66.20) 3.70% yield.
–One of three more defensive stocks for a bear market
Kraft Foods Inc. (NYSE: KFT) $29.40 (52-Week: $25.72-31.09) 4.00% yield.
Merck & Company, Inc. (NYSE: MRK) $34.54 (52-Week: $29.94-41.56) 4.40% yield.
–Watch attacks continuing on Big Pharma
Pfizer, Inc. (NYSE: PFE) $15.93 (52-Week: $14.00-20.36) 4.60% yield.
–Watch attacks continuing on Big Pharma
Verizon Communications Inc. (NYSE: VZ) $29.55 (52-Week: $25.99-34.13) 6.40% yield.
-Will Google, Skype, Vonage, and VocalTec drive away more landline users?
10YR T-NOTE 2.51% to 2.53%
Boeing Co. (NYSE: BA) $61.70 (52-Week: $47.18-76.00) 2.80% yield.
–Positive Goldman Sachs notes this morning
Caterpillar, Inc. (NYSE: CAT) $64.79 (52-Week: $43.19-72.83) 2.70% yield.
General Electric Company (NYSE: GE) $14.64 (52-Week: $13.03-19.70) 3.30% yield.
Home Depot, Inc. (NYSE: HD) $28.31 (52-Week: $24.47-37.03) 3.40% yield.
Intel Corporation (NASDAQ: INTC) $18.28 (52-Week: $18.18-24.37) 3.40% yield.
The Coca-Cola Company (NYSE: KO) $55.22 (52-Week: $48.38-59.45) 3.20% yield.
McDonald’s Corporation (NYSE: MCD) $73.60 (52-Week: $53.88-73.94) 3.00% yield.
-A safe defensive stock for a bear market
3M Company (NYSE: MMM) $80.03 (52-Week: $68.96-90.52) 2.60% yield.
Procter & Gamble Company (NYSE: PG) $59.56 (52-Week: $39.37-64.58) 3.20% yield.
The Travelers Companies, Inc. (NYSE: TRV) $49.13 (52-Week: $46.55-54.83) 2.90% yield.
United Technologies Corporation (NYSE: UTX) $65.33 (52-Week: $58.60-77.09) 2.60% yield.
Exxon Mobil Corporation (NYSE: XOM) $58.77 (52-Week: $55.94-76.54) 3.00% yield.
This does occur from time to time where bond yields drop under the yield of the DJIA components. It needs to be noted as well that this is due in part to rising dividend yields because of lower share prices AND because of falling yields on Treasuries. Both are due to double-dip recession fears growing now that the economic data is coming out so poorly. The 10-Year yield was 3.0% as recently as July 29 and the 30-Year yield was over 4.0% as recently as August 10. The DJIA is fighting told on to 10,000 in mid-afternoon trading, while the August 10 DJIA was 10,644.25 and the July 29 DJIA was 10,467.16.
Back in the days of our grandparents, this was actually considered routine. Generally speaking, this is when fund managers will tell you they cannot find an exact bottom in stocks, but they’ll also tell you that it represents great value for investors that have a very long-term outlook. Too bad buy and hold as a ‘forever’ strategy has been dead for years.
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JON C. OGG
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